Crude Oil Surpasses $50, Setting Stage for Inflation

International oil prices surpassed $50 a barrel for the first time.

The price of West Texas Intermediate (WTI) for November delivery rose $0.48 to $50.12 per barrel on October 1 on the New York Mercantile Exchange (NYMEX), said the Korea National Oil Corporation (KNOC) yesterday.

It is the first time the WTI closing price has exceeded the $50 mark since crude oil began futures trading on the NYMEX in March 1983.

The futures price of Brent oil was up $0.24 to close at $46.62 on the International Petroleum Exchange of London.

The spot market also saw a price increase. WTI was traded at $50.08, up $0.48 from the previous day, and Dubai oil was up $0.50 to $38.01.

The price hike is attributable to fears over a Nigeria cease-fire and a possible supply disruption in the Gulf of Mexico due to hurricane damage, the KNOC explained.

Analysts in the oil market predicted that the high oil prices were likely to continue for the time being, even though the circumstances could get better depending on the Nigeria incident.

Concerns are rising that this year’s inflation rate might surge to the four-percent range from the government-set target of around three percent.

The government initially set the inflation target expecting the average annual price of Dubai oil to be $31. If the current high prices continue, however, the average price could rise over $34, affecting the inflation rate in the fourth quarter of 2004 and next year’s economic growth rate, said the Ministry of Finance and Economy (MOFE).

Meanwhile, G7 finance ministers and central bank governors, who had a closed conference on October 1 in Washington, DC, issued a statement urging stability in the oil market and exchange rates.

They pressed oil-producing countries for sufficient supply, and oil-consuming countries for energy efficiency.

Kwon-Heui Hong Ji-Wan Cha konihong@donga.com cha@donga.com